FYR Macedonia introduces application of preferential VAT rate to pellet products

The preferential VAT rate of 5% in FYR Macedonia is commonly applied to – among others – human food products; medicines and medical equipment; publications; seeds and planting material used in agriculture; other agricultural products such as fertilizers, foils and machinery; as well as software and hardware products.

The latest addition to the list of preferential VAT goods/services was introduced on 14th October 2016, and is effective as of the same date. It prescribes the application of the reduced VAT rate of 5% to the supply of pellet fuel, pellet boilers and pellet stoves.

The amendment was first announced in May 2016, along with the announced subsidization of pellet stove purchases. The aim of both measures is to curb the still-common wood heating in the country. Depending on the methodology, it is estimated that anywhere between 35% and 80% of households in the country are still using wood as the primary heating element.

One obstacle that remains to be removed is the delayed implementation of the application of the new VAT rate to imports. As the customs authorities are still expecting the Ministry of Finance to issue the rulebook in regards to the amendment in order for them to apply the new rete, the previously valid standard rate of 18% continues to apply to the import of such products while their domestic resale must be done with the rate of 5%, thus creating a financially disadvantageous position for traders.

Elena Kostovska
Eurofast Global, Skopje Office
+389 2 2400225